Managerial Overconfidence?Debt Financing And Firm Performance

The real estate industry has been developing rapidly more than 20 years,and has rapidly become the backbone of economic development.Though faced with the macroeconomic policy regulation and complex domestic and international economic situation,the real estate industry has maintained a relatively fast growth in recent years.With the continuous acceleration of urbanization and the transformation and upgrading of the economic structure,real estate industry still has a period of rapid expansion for a certain period of time,so the real estate enterprises have expanded to occupy the remaining market share in recent years.The real estate industry itself has the characteristics of high added value,highly leveraged and capital intensive.Debt financing is indispensable in the process of development,so managers need to make reasonable financing decisions.Debt financing theory provides strongly support for financing decisions.However,the traditional debt financing theory contains rational economic man hypothesis,it thought that the decision-makers are rational the decision-makers are rational.With the deepening of research,many economic behaviors are difficult to be explained by traditional theories in the capital market.The development of behavioral finance provides a reasonable explanation for these irrational economic behaviors.Behavioral finance brings psychology and sociology into traditional economics and finance,investigates the influence of economic man's psychological characteristics on decision,overconfidence is the most important research object in behavioral finance theory.Overconfidence is widespread in corporate executives as a solid psychological phenomenon,this psychological characteristics make managers appear cognitive bias and affect their financial decisions.The research on overconfidence in China started late,and the cognition level of enterprises on Overconfidence and overconfidence caused by financing decisions is relatively low.The development of the real estate industry is closely related to debt financing.Real estate managers are prone to cognitive bias faced with overheated industry in recent years.Therefore,it is very important to study the relationship between overconfidence and financing decisions.Firstly,the article sorts out and summarizes the related literature at home and abroad.secondly,we define the variables in this paper,and we conduct a theoretical analysis based on the theory of debt financing and behavioral finance.Then we suppose six hypothesis,and select 110 listed real estate's business data as the research object to examine the influence mechanism between overconfidence,debt financing and firm performance by an established empirical model.In the next,six hypothesis is tested and the results are explained in combination with the actual situation in China.Research results show that:(1)Managerial overconfidence has a remarkable positive effect on debt financing with high financial leverage,the overconfident managers prefer short-term liabilities to long-term liabilities.Overconfident managers prefer bank loan financing(2)In the commercial credit financing,overconfident managers prefer payment instead of bonds payable,advance payment(3)The behavior of choosing radical short-term liabilities and high financial leverage by the overconfident managers will do harm to firm performance.Finally,according to the conclusions of the research,we provide some suggestions for the listed real estate enterprises to strengthen the cognition of overconfidence,improve and perfect the financial decision-making mechanism,strengthen the corporate governance and reduce the irrational financial decisions brought about by the overconfidence of the managers and improve the performance of the enterprises.